As the world population increases, it has become less of a surprise that economically developed countries have begun to experience the trend of an aging population. This has resulted in the increase of life insurance policies that are specially tailored to the needs of older people.
Such policies, usually sold as final expense insurance (but sometimes referred to as preneed or prepaid insurance), have been introduced by some insurers in order to give older members of the public the opportunity to buy insurance as they may not be able to afford a standard life policy. Final expense insurance policies typically offer immediate cover (although, a vesting period isn’t uncommon) which does not expire over a certain time, and the payout is usually used for funeral expenses such as travel and hearse hire.
The benefits of final expense insurance for customers, as well as companies eager to make themselves stand out from the pack, are quite obvious – so what does the future hold for the industry? According to a press release sent out by specialist life insurance company, Life Insure, they have embarked on an unprecedented move – to offer an insurance policy exclusively for those aged 100 or over.
On first reading, the notion seems absurd but possible at the same time. For someone who writes about the insurance industry frequently, I have seen many interesting trends and gimmicks develop in this highly competitive market, and one insurance company offering cover for a small but growing target market does seem like quite a good idea. Suffice to say, I was a little disappointed to find that the policy does not explicitly exist in reality – and was most likely a PR stunt. This conclusion was further enhanced by the comedic tone of the release and the overly senile responses of the centenarians who attended the product launch. (‘Gary Foss was more concerned with taking a nap’!)
That said, the prospect did get me thinking. Whether such policies do or do not yet exist, it doesn’t seem too far fetched to believe that they will do soon enough. The fact that the population is aging is one thing, but as a marketing aid – being the first company to seriously offer centenarian life insurance will no doubt be a very positive step indeed. Not to mention a sign of changing times!
Centenarian Life Insurance: The future of the insurance industry?
Life Insurance - A Short History
With the recent economic meltdown, the insurance industry has become the subject of news reports and articles all over the world as the US government offers more and more bailout capital to fledgling companies. As I write this (2nd March 2009), AIG, including their subsidiaries American Life Insurance Co. and American International Assurance Co., have been given $30 million and this led me to write this article: A Short History of Life Insurance.
Whilst the act of insuring dates as far back to 5000 BC, life insurance is said to have originated in Rome with funeral expenses being covered by “Burial Clubs”. In his book, The Roman Cult of Mithras, Manfred Clauss describes the ‘Collegia’ whose primary function may have been ‘to provide a decent burial for their deceased members,’ at a time when many would have had limited financial resources.
Insurance all but disappeared in Rome as the civilization fell in 450 AD. However, in the East similar insurance arrangements have lasted since 1000 BC, such as ‘community insurance’, and similar ‘burial societies’ established by Buddhists. Such schemes were also established in England. These were called ‘friendly societies’ in which donations were kept for emergencies.
In late 17th Century, and against the trend of the rest of Europe, life insurance began being promoted – particularly in London. At this time of growing sea-expeditions and importing/exporting, Lloyd’s Coffee House (a café frequented by sailors, shipbuilders, and merchants) became the hub for reliable shipping news and communities of sailors who would insure cargoes etc.
Lloyd’s Coffee HouseToday, Lloyds of London is still an important British insurance market. The developing English insurance model (that was further consolidated by Nicholas Barbon who opened a buildings insurance office after The Great Fire of London) soon became adopted worldwide.
The Great Fire of LondonIn the US, the first life insurance company available to anyone was established in 1761, though it wasn’t until the New York Fire disaster of 1835 that the public began to fully understand its importance. Public liability insurance arrived with the birth of the automobile at the end of the 1800s.
New York Fire disaster of 1835By the turn of the 21st Century, the USA became the second biggest market for life insurance premiums after the EU. In late 2008, after the collapse of the US housing bubble, financial institutions began to feel the knock on effect of the “Credit Crunch”, the first being the mid-sized UK bank Northern Rock, followed by the subsequent bankruptcy of the financial services firm Lehman Brothers. This caused the governments of the US and UK to intervene with certain companies caught up in the crisis, including AIG who have recently reported the biggest net loss in history at $61.7 billion for their last quarter.
Life Insurance – There’s more to giving up smoking than just getting healthy
March the 11th sees the 25th anniversary of No Smoking Day, a day of national recognition and support for those who want to try and give up.
Over the past 25 years the campaign has grown from an awareness day organized by a group of individuals with an interest in health, to becoming a fully registered charity in 1991, and onward to employing a full-time staff and becoming one of the best-known days of its type. In light of the ongoing global economic difficulties and the ‘credit crunch’, this year the campaign is more geared towards how smokers can save money if they give up – alongside the well-known health benefits.
So how can giving up smoking at this time help you save m
oney?
The first financial saving to consider, is what you might save on a day to day, week to week, or year to year basis, if you were to give up smoking now. According to myfinances.co.uk, the average packet of cigarettes costs £5.67 in the UK.
If we assume that the average smoker gets through a packet a day, a week of non-smoking will save you £39.69, a month of non-smoking will save you in the region of £177.75 – yet over an entire year you will be set to save a massive £2,069.55.
It is fair to acknowledge that not everyone who wants to give up smokes £5.67 worth of cigarettes everyday, but during these times of belt-tightening and cutting back, the prospect of saving over a thousand pounds after a year of non-smoking must sound tempting to anybody.
However, savings from giving up smoking don’t stop with the cost of cigarettes. As life insurance companies become more and more competitive whilst frugal customers threaten to cancel their policies, now is the best-time for non-smokers to benefit from slashed monthly premiums in comparison to their smoking peers. Savings of up to 50 percent on payments can be made for non-smokers, whilst comparison website moneysupermarket.com estimate a 30 year-old male smoker will spend over £8,000 more on life cover than a non-smoker of the same age.
The financial benefits of giving up around the 11th March go even further though. With the growth of No Smoking Day year on year, many businesses, including supermarkets and shops, have tried to get a piece of the action. Supermarket giant, Asda are discounting prices of nicotine patches and gum in an offer to help their visitors stop at this time. It certainly seems that, in terms of saving money from stopping smoking, March 2009 may well be the perfect month to give it a try.
Life insurance, the last thing on our minds
So where are us Brits cutting back when it comes to our monthly spend? And when it comes to some of the things we’ve been idly paying for until now, are we in danger of forgetting how essential these things actually are?According to firstrung.co.uk, in a recent survey 42 percent of those asked said that should they be forced to cut back on one monthly payment, they would stop paying into their savings accounts. Additionally, from a survey of families carried out by creditchoices.co.uk, 37 percent would claim to reduce their savings, in a move to seemingly ignore the consequences this could have for the future.
That’s not to say that we are not also cutting back in less essential areas. In the same survey just over half of people asked said they would stop spending money on leisure activities and holidays. However, this is not only due to the fact that we have less credit due to the crunch, but also because the price of raising a family has increased at a significant rate recently – 4 percent in a year, and a full 38 percent in the last five years.
This is where the respective meanings of ‘essential’ and ‘non-essential’ seems to be getting a little foggy, for it doesn’t seem illogical to me that I would consider paying for a holiday as not essential. However at the same time, the statistic of just 52 percent of families choosing to cut back in this area suggests there is a great portion of people who would disagree with me.
Similarly, whilst I would consider life insurance to be closer to the ‘essential’ end of the payment spectrum (especially where raising a family is concerned), there are a fair amount of people who are eager to stop those payments despite the risk to future security. Interestingly, there is a significant difference between those asked in the ‘individuals’ survey discussed by firstrung.co.uk, compared to those asked in the ‘family’ survey by creditchoices.co.uk. The former survey reports that five percent would neglect their life insurance policies, whilst 23 percent are said to be reducing or cancelling life insurance in a family situation.
So is this percentage difference because of the greater need for families to cut back in more areas, or because of a gradual change in what we as a nation prioritize when it comes to spend? Essentially, do we feel more obliged to have a holiday now than we did in the past? It’s a complex question, but it seems to be a worry to some in the business who are also arguing that long-term financial security such as life insurance is more important now than it has been in the past. To those people, even the thought of cutting back in such an area does not seem sensible at all.
Life Insurance for Storm Chasers
Storm chasing is the recreational pastime of seeking out extreme weather conditions with the aim usually being to satisfy a personal interest by photographing or videotaping the phenomenon.
Storm chasers gather near approaching storm Although storm chasers rarely get paid for the activity, and are usually meteorologists or scientists acting in their spare time, the countless amount of documentary evidence they have produced has often gone on to benefit researchers, governments, and the authorities. So, if not affecting life insurance directly, do storm chasers receive higher premiums?
Tornadoes are the icing on the storm chaser’s cake, and although spotting one is not the most important goal of chasing, to be able to track and monitor the unpredictable nature of tornado for a significant period of time is considered a great achievement.
Subsequently, the areas of the world (most notably, the mid-south east of the US) that experience frequent tornado activity are popular destinations for storm chasers. Risk-wise, although not as powerful as hurricanes, they are certainly more frequent (approximately 1000 per year). Therefore it is standard procedure in these areas to check whether your homeowner’s insurance covers tornado damage and to expect higher premiums because of it.
Thunderstorms are much more likely to be successfully ‘chased’ than tornadoes. Interestingly, despite the arguably high frequency of thunderstorms, the average chance of an American being struck by lightning is 1 in 576,000, yet expectedly, the chance for a chaser to be struck is far greater.
So far no storm chasers have died, and it seems that the old adage of the car being the safest place to be has proved quite true as those that have been struck have been outside in close vicinity to wire fences and pylons that have conducted unexpected strikes.
Hurricanes, although rarer than the above, are no-doubt more dangerous and combine all the risks of the above. As a result of this, high risk areas are prone to needing hurricane insurance and this can include most of the US.
A typical storm chasing vehicle Many of the most awe inspiring chaser photos are of flash floods and coastal areas during a hurricane as a cause of high precipitation and wind. This leads to the biggest risk for chasers, it not being the storm itself, but driving through severe wet weather (core punching) which can include heavy rain or even hail and making it incredibly treacherous for any driver. To date, the only recorded chaser death was caused by a car accident.
Visit the Official Storm Chaser website for more information on storm chasing.
Life Facts
Ironically, more money is spent each year on alcohol and cigarettes than on Life insurance.
Not the most interesting fact but you might like these facts of life....
02) At the end of every party there is always a girl crying.
03) One of the most awkward things that can happen in a pub is when your pint-to-toilet cycle gets synchronised with a complete stranger.
04) You’ve never quite sure whether it’s ok to eat green crisps.
05) Everyone who grew up in the 80’s has entered the digits 55378008 into a calculator
06) Reading when you’re drunk is horrible.
07) Sharpening a pencil with a knife makes you feel really manly.
08) You’re never quite sure whether it’s against the law or not to have a fire in your back garden.
10) Nobody ever dares make cup-a-soup in a bowl.
11) You never know where to look when eating a banana.
12) Its impossible to describe the smell of a wet cat.
13) Prodding a fire with a stick makes you feel manly.
14) Rummaging in an overgrow garden will always turn up a bouncy ball.
15) You always feel a bit scared when stroking horses.
16) Everyone always remembers the day a dog ran into your school.
17) the most embarrassing thing you can do as schoolchild is to call your teacher mum or dad.
18) The smaller the monkey the more it looks like it would kill you at the first given opportunity.
19) Some days you see lots of people on crutches.
20) Every bloke has at some stage while taking a pee, flushed half way through and then raced against the flush.
21) Old women with mobile phones look wrong.
22) Its impossible to look cool whilst picking up a Frisbee.
23) Driving through a tunnel makes you feel excited.
24) You never ever run out of salt.
25) Old ladies can eat more than you think.
26) You can’t respect a man who carries a dog.
27) There’s no panic like the panic you momentarily feel when you’ve got your hand or head stuck in something.
28) No one knows the origins of their metal coat hangers.
29) Despite constant warning, you have never met anybody who has had their arm broken by a swan.
30) the most painful household incident is wearing socks and stepping on an upturned plug.
31) People who don’t drive slam car doors too hard.
32) You’ve turned into your dad the day you put aside a thin piece of wood specifically to stir paint with.
33) Everyone had an uncle who tried to steal their nose.
34) Bricks are horrible to carry.
36) Knowledge is knowing a tomato is a fruit; Wisdom is not putting it in a fruit salad.
Life Insurance Terms Glossary
When choosing your life insurance policy you will come across a host of bewildering terms. The following brief glossary is intended to help you steer your way through at least some of the maze.
Critical Illness Cover
Either as an add-on to a term life insurance or as a standalone insurance, critical illness cover will offer you and your dependents protection by paying out a lump sum (or occasionally a regular income for a pre-determined period) should you be diagnosed with a specified critical illness during the term of the policy.
Convertible Term Assurance
This is a type of life assurance that provides the policyholder the benefit of converting a normal, level term insurance to include a whole life, investment or endowment insurance element, which effectively provides a form of savings or investment that matures when the policy comes to term.
Decreasing Term Assurance
Over the course of the insurance term, the guaranteed sum assured steadily decreases. This type of insurance is traditionally used to cover the declining balance of outstanding repayments on a mortgage loan. Most lenders will insist that some form of life assurance is in place to protect their lending in the event of the borrower’s death.
Family Income Benefit
These insurance policies pay a regular – and tax free – fixed monthly or annual income to your family in the event of your death within the agreed term of the insurance. They are especially attractive to policy holders with young families and can be arranged as an add-on to a term life insurance or as standalone insurance.
Guaranteed and Reviewable Premiums
Policies with these types of premium are just as they say on the label: the cost of premiums can either be guaranteed throughout the term of the policy (and are sometimes called level premium policies) or they can vary as the rate of inflation varies, by linking the price of premiums to movements in the Retail Price Index.
Income Protection
This type of insurance covers payment of a proportion of your salary for a given time if you are temporarily unable to work because of sickness or injury. The length of time payments are receivable depends on the policy term – commonly two years, or up to age 60 or 65.
Increasing Term Assurance
This is a convenient way to compensate for the adverse effects of inflation over the term of the insurance by providing for an increasing value in the sum assured.
Indexation
Index-linking allows both premiums and the sum assured to be increased in line with the Retail Price Index.
Level Term Assurance
This is the simplest, most straight forward, no-frills life insurance. You pay the agreed premium and the insurer in return agrees to pay a fixed, guaranteed lump sum if at any time you should die during the term of the insurance.
Mortgage Protection Assurance
This is a form of life assurance intended to ensure that your mortgage is fully paid off in the event that you died before you had had the opportunity to pay it off.
Renewable Term Assurance
This arrangement gives the policy holder an option to renew the insurance at its expiry date and continue without having to provide a medical report.
Terminal Illness Benefit
As the name suggests, this is very similar cover to that offered by critical illness cover, as described above. In this case, however, payment is made in the event that the policy holder is diagnosed with a terminal illness within the term of the insurance.
Total and Permanent Disability
Similarly total and permanent disability cover offers protection in the form of a lump sum (or occasionally regular monthly) payment if the policy holder suffers a total and permanent disability during the term of the insurance.
Trust
A Trust is a way of putting something valuable (in this case your life insurance policy) aside to ensure the money goes to the people you want it to when you die. If the policy isn't owned under trust it automatically becomes part of your estate, thus increasing its exposure to inheritance tax. Putting the policy in the name of a trust can help to avoid inheritance tax.
Waiver of Premium
This can be offered as an optional policy cover that providies continued life insurance coverage without further premium payments if the policy holder becomes unable to meet their premiums due to injury, sickness or unemployment.
Terminal Illness cover
This type of cover also pays out if you are diagnosed with a terminal illness (terminal illness benefit does not typically apply in the last 18 months of the policy, and life expectancy must typically be less than 12 months).
Life Assurance
Interchangeable with Life Insurance (see def.) Life cover that provides a guarantee or promise of cover in the case of certain event that will happen e.g. death.
Life Insurance
Interchangeable with Life Assurance (see def.) Life cover that provides guarantee or promise of cover in the case of certain event that might happen e.g. death.
Death in Service
Lump sum cover provided by an employer. This is in the event of an employee's death whilst in employment. Typically a multiple of salary e.g. 4x salary.
Whole of Life
Whole life insurance is the most common variety of permanent life assurance, providing a guaranteed amount of death benefit and a guaranteed return on cash values. Premiums are also fixed and guaranteed not to increase.
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